On 24 April 2020, the Australian Federal Government introduced a new National Code of Conduct in relation to commercial leases, including retail leases, in response to the COVID-19 pandemic.
The purpose of the Code is to impose a set of good faith leasing principles between landlords and tenants, in order to aid the management of cash flow for both landlords and tenants who have suffered financial hardship as a result of the COVID-19 pandemic.
Here is our summary of the new Code of Conduct regarding commercial and retail leases.
Which tenants qualify?
To qualify under the National Code of Conduct, tenants must qualify for the JobKeeper scheme under Coronavirus Economic Response Package (Payments and Benefits) Rules 2020, and their turnover for the financial year 2018-2019 must have been less than $50 million.
What CAN’T landlords do?
If a tenant qualifies under the National Code of Conduct, the landlord cannot evict the tenant, exercise a right of re-entry to the premises, seize the goods of the tenant, require the tenant to pay interest on or a fee for unpaid rent, terminate the lease, or increase the rent payable.
This is effective from 24 April 2020 to 24 October 2020.
Obligation to renegotiate rent and other terms of the lease
Any party to the lease can request the other parties to renegotiate the rent payable under the lease. The other party must renegotiate in good faith. There are many principles that may apply to this negotiation.
What the law does not do
This law does not stop the landlord from coming to a mutual agreement with the tenant regarding the lease, or prevent the landlord exercising other rights under the lease.
For more detailed information about all of the above, have a look at our factsheet.
Any arrangements that you make should be in writing to avoid any issues later on.
If you have any questions about commercial leases or retail leases in the current environment, then give us a call on (02) 9687 9322.